Al-salaamu ‘alaykum. There are more than few different opinions on the Internet on topic if Forex trading is Halal or Haram. As I am no scholar I can make no opinions on the matter so I will present you what other had to say on this.
There are questions and answers from Majmoo’al-Fatawa of late Scholar Ibn Bazz (R) that refers to currency trading being Halal or Haram.
Is Currency Trading Halal?
English version of the book can be found here.
From the website: His Eminence Shaykh `Abdul `Aziz ibn` Abdullah ibn Baz gave permission to collect his Fatwas, articles and lectures in one volume divided into different parts. This permission was granted in response to the requests of many people, hoping that Allah (Exalted be He) extends its great academic benefit to all. We implore Allah (Exalted be He) to add it to the record of his good deeds and make it a disperser of doubts. Many Muslims inside and outside the Kingdom of Saudi Arabia attempted to collect and distribute the works of his Eminence driven by their love and trust in his knowledge.
Q 111: Is it permissible to earn money from trading in currency? For example, we exchange LYD 300 for USD 1000, which rates for TND 800 in Tunisian banks. Afterwards, we exchange the TND 800 for LYD 800. In that way, we will have earned LYD 500. Is this Halal (lawful) or Haram (prohibited)?
It is also not permissible, because in that case it is regarded as a kind of Riba (usury/interest)-based transaction. Thus, exchange must take place in the same sitting and hand to hand if the currencies are different. However, if the exchanged currencies are of the same kind, two conditions must be satisfied: likeness and exchange, which should take place in the same sitting. This is according to the saying of the Prophet (peace be upon him): “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt, like for like, equal for equal, hand to hand, and if these classes differ, then sell as you wish if payment is made hand to hand”. (Related by Muslim in his Sahih (authentic) Book of Hadith) Currencies have the same ruling as the mentioned classes; if they are different; inequality is permissible as long as payment is made in the same sitting. But, if they are of the same kind, such as dollars for dollars or dinars for dinars, exchange should be made in the same sitting along with likeness. May Allah grant us success.
Q 112: Is it permissible to buy paper money and save it for the sake of selling it afterwards when its value increases?
(Part No. 19; Page No. 173)
A: There is no harm in buying any goods, keeping them for sale, and selling them when the price rises on the condition that this does not involve any disadvantage to Muslims. In accordance, if a person buys some English or Egyptian pounds, Iraqi dinars, and so on, and holds them so that when their value increases they will sell them, there is no blame on this provided that exchange is made in the same session. This may be called monopoly and it is not allowed if it involves any harm to Muslims in their food and the like.
Q 113: It is known that Arab migrants return home after they had brought foreign currencies such as dollars and golden coins or even any other currency different from the currency of their own country in order to sell it. So, they seek to sell the foreign currency at a higher price. There are several places to sell these currencies whether official or in what is called the black market. The question is: When can we consider this sort of Riba (usury/interest) as Riba Al-Fadl (usury of excess, selling an item for another of the same type, on the spot, but in excess) and what should be done then?
(Part No. 19; Page No. 174)
A: Currencies are different. So if anyone sells a currency with another of the same kind; hand in hand, it will not be part of Riba such as to sell a dollar for an Egyptian pound or for a Yemeni currency; hand in hand. In this case, there is no harm upon them in doing so. Likewise, if a person sells one currency for another currency, hand in hand, it will not be Riba. If a person sells one currency for another currency to a fixed term such as to sell a dollar for a Yemeni, Egyptian, Australian, Jordanian or Iraqi Dinar for a fixed term, hand in hand, this will be considered as Riba (usury/interest) because the currency will take the same ruling of gold and silver. So, it is not permissible to sell one for another on credit, but a person should receive the value in hand during the session. The kind of Riba known as Riba Al-Fadl (usury of excess, selling an item for another of the same type, on the spot, but in excess) takes place when dealing with the same currency such as if the person sells one currency with the same kind plus an extra amount such as selling an Australian dollar for an Australian dollar plus extra amount; an Australian dollar for two Australian dollars. In this case, it is considered Riba even if it is hand in hand. Or if a person sells ten Saudi riyals for eleven riyals, this is Riba Al-Fadl (usury of excess, selling an item for another of the same type, on the spot, but in excess) Yet, in case it is made for a fixed period, it will be Riba Al-Fadl (usury of excess, selling an item for another of the same type, on the spot, but in excess) as well as Riba Al-Nasi’ah (usury of delay, conditional excess for delay of payment. Likewise, if a person exchanges one dollar for two or three instantly; hand in hand, it will be Riba of excess. If it is made for a fixed period, it will be Riba of excess and on credit.
There is one answer that I found on Quora when I was searching for my answer if currency trading is Halal or Haram for Muslims.
I Am a Muslim and I Trade ForEx
You can find link to this discussion here. This is what one user had to say about the topic. I found it interesting:
I’m a muslim and yes I do trade fx.
And I once argued with one of my colleague about it (he’s an old timer conservative).
Since both of us working abroad, I explained to him that either profit oriented or not, both of us are involved in currency trading.
Just like transferring money home, as USD is our world’s reserve currency which means we’re indirectly involved in currency trading even in an atomic portions of it (fx trading circulates over 5 trillion dollars a day).
So yes, we’re all in it.
The thing that makes it quite questionable is regarding swap for as muslims it’s clearly categorized as riba just like loans interest.
But nowadays many brokers provide swap free or islamic account for higher spread as consequence.
Issue no. 1 solved.
Yet from my personal view and many fellow agree with it, there’s another catch that makes trading to be considered as haram.
Jumping in a trade as rolling a dice without proper analysis and such could put you in a gambling situation.
It’s a bit blurry so to say.
But if you’re honest to yourself, you know whether you’re trading or gambling.
And to support my answer, trading without swap is considered as halal by Islamic authority in Indonesia – my home country- which is the largest muslim country.
Learning to do our best in trading should prevent us from making ourselves gamblers in trading fields.
Hope it helps.
Well, I think he has a point about opening positions without proper Technical Analysis and jumping into trades blindfolded. That is a gamble. Why would you do that, whether you are a Muslim or not!?
Avoid Riba in Forex Trading
Other point is that ForEx trading normally involves Riba. Traders will charge you interest for keeping open positions during the night. That is not Sharia compliant. In order to meet the needs of their Muslim traders ForEx brokers introduced Islamic ForEx accounts or no Riba accounts.
Benefits of No Riba ForEx Account
Your broker will probably ask for a proof that you are practicing Islam. After that you will be granted Islamic Fx account. Benefits of this account are:
- No rollover interest
- Leverage offered without interest
All our recommended brokers offer No Riba Fx accounts.